February 4, 2009

China's government has proposed to use futures trading as a tool to stabilise the domestic pig industry in order to address rural issues.

The government has clarified the positive roles of futures in the pig industry and has put the promotion of pig futures as the priority for agricultural development, according to unnamed sources.

Hu Yuyue, director of Futures Research Institute of Beijing Technology and Business University, said it is vital to launch pig futures soon as it greatly concerns people's livelihood and the strengthening of related industries.

Hu added that the quality standard and related rules for pig futures have been formulated and demonstrated.

Experts note that the government could refer to pig futures to make policies or adjust pig reserves for industry development.

The promotion of the futures could also introduce more producing companies, processing companies and traders into the market, facilitating large pig farms to join in hedging trading, Hu said.

Even if pig enterprises do not enter the futures market, the pig futures can also serve as guide to their production, said an official with the China Animal Agriculture Association.

China is the world's largest consumer and producer of pork, and pigs are closely connected to the Consumer Price Index (CPI), urban consumption as well as farmers' income, according to Hu.